Cypress Gardens’ share issue to raise $15.2m

Cypress Gardens Development ­Corporation
aims to raise $15.2 million through a the issue of preference shares to clear its debts and continue searching for a buyer, or joint-venture partner, for a planned retirement village development on Queensland’s Gold Coast.

Preliminary approvals have been secured to build 970 units on a 25.2-hectare block of vacant land the company owns on the outskirts of Surfers Paradise.

A final development application for a retirement village with very similar height, width and depth specifications on the buildings and no other major changes to the plans would qualify for a final nod from council.

The project is being marketed to prospective developers locally and in China. The directors hope recent signs of improvement in the Queensland property market will help attract a buyer or partner within the next 12 months.

Up to 15.2 million preference shares are available at an offer price of $1 ­per share to raise a maximum of $15.2 million. The float has a minimum subscription of $6.9 million.

Director shareholders will control 100 per cent of ordinary shares and preference shareholders will have no voting rights.

John Fitzgerald of Queensland ­property developer JLF Corporation and local builder Gary Deane of Gary Deane Construction are the two founders and controlling directors. The company has two other directors.

A minimum equity raising of $6.9 million will enable Cypress Gardens ­Development Corp to pay back a ­$4 million bank loan, refund noted holders $2.05 million, and fund working ­capital for three years.

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If the maximum subscription is achieved the additional money will be used to pay $2.85 million outstanding to the project manager and repay $5.3 million worth of loans made by the founders.

As at September 2013 the company’s only asset, the undeveloped parcel of land, was valued at $11.7 million.

If a deal to develop the site is struck that generates profit greater than $30 million but less then $40 million preference, shareholders will be entitled to a 25 per cent payout ratio. If profit on the sale is greater than $50 million the payout ratio drops to 10 per cent.

Dividends are not guaranteed but are expected to be distributed by the end of 2017. The biggest risk to preference share investors in the initial public offering is that the directors may not strike a deal at a high enough price to provide sufficient liquidity to fund the full value of the planned share redemption.

“It is a fantastic, well-located development and we are confident the timing is right to build something like this on the Gold Coast," JLF Group of Companies managing director and Cypress Gardens Development Corp director James Fitzgerald said. James is the nephew of the founder and chair John Fitzgerald.

Custodian Capital Investments is ­acting as the broker for the IPO targeting retail investors. The minimum commitment required from each investor is $25,000, with additional investments of $5,000. The offer opened on February 4. It closes and is due to begin trading on March 31. No ordinary shares are on offer.